Search engines, social media, and e-mail have been part of modern life for so long that you probably barely even think about them anymore. The Federal Reserve would like to change that.
Part of the Federal Reserve’s job is measuring America’s gross domestic product. To simplify a very complex topic that people tend to need advanced degrees to fully understand, the GDP is the total economic value of the goods and services that a country generates in one year. An accurate GDP measurement is essential for gauging how healthy the economy is, and whether it is on an upward or downward swing.
As CNBC reported, Fed Chairman Jerome Powell pointed out in a speech to a gathering of economists this week that most of us now take for granted the way the technology boom of the 21st century has changed our lives and the economy. Therefore, the value that, say, GPS and Facebook and other digital revolutions that now seem commonplace have added to the economy has been largely unknown — until now.
Powell cited by a paper by MIT economist Erik Brynjolfsson, Avinash Collis of the National Bureau of Economic Research and Felix Eggers of the University of Groningen in the Netherlands, in which the authors “conducted massive surveys to estimate the monetary value that users place on the tools of modern life.”
The survey found the following interesting bits of information, which offer insights as to how valuable people consider Google, Facebook, Twitter, and other services to be:
• “The median user would need about $48 to give up Facebook for one month.” That’s $576 over 12 months.
• The cost to get a median user to quit YouTube or a similar video streaming is $1,173 a year.
• According to a survey of European students, Snapchat was valued at about 2.17 euros, LinkedIn at 1.52 euros and WhatsApp at 536 euros.
• Consumers would need a median $17,530 a year to stop using Google and other search engines, “making it the most valuable digital service.”
Among other things, this information is important to have so that the Fed can fully calculate a country’s GDP. As CNBC points out “the current expansion is the longest in history, yet productivity gains are weak and GDP growth, while steady, is far from stellar.”
Brynjolfsson proposed that, to remedy the situation, economists should start looking at what he calls GDP-B, a measure “of economic health that calculates benefit rather than output.” The benefits from Facebook alone, Brynjolfsson says, would have added 0.05 to 0.11 percentage points to annual growth.